Greenlight’s Einhorn buying options on gold-miners ETF

By John Spence

Hedge fund manager David Einhorn is heeding his grandfather’s counsel and buying gold for the first time, Bloomberg reported. Einhorn, who runs Greenlight Capital, in a Jan. 20 letter to clients said the size of the Federal Reserve’s balance sheet is exploding, and the currency is being debased. Many economists are warning that inflation is the inevitable result of higher government spending to battle the economic crunch.

Aside from buying gold, Greenlight has added call options on gold and the Market Vectors Gold Miners ETF (GDX), according to Bloomberg. Although it’s pulled back lately, the ETF, which tracks gold-miner stocks, has gotten off to a strong start in 2009.

At the same time, an ETF that holds gold in a vault — SPDR Gold Shares (GLD) — is at record levels. Investors have been piling in and the ETF now holds more than 800 metric tons of gold.